Jan 1, 2021
OUR POSITION: Homeowners better buckle up and brace for a hike in homeowners insurance rates in 2021 and beyond.
There is no good news for anyone who needs/has homeowners insurance.
A near perfect storm of events and the need to shed policies by Citizens Property Insurance Corp. — Florida’s last resort for home insurance — threatens to drive prices up substantially in 2021. And, there appears to be no help in sight as the state Legislature has its hands full with COVID-19 response and a huge hole in the state budget.
Jim Nolan, president of Nolan Family Insurance, says the two key drivers are soaring re-insurance rates and litigation.
Reinsurance is the insurance local companies buy to help them pay claims — especially after a catastrophic event like a hurricane. Companies that supply that life-line to smaller insurance companies have jacked up their rates significantly. While Florida escaped the hurricane season in decent shape, reinsurance companies were stung by hurricanes that hit Louisiana and even the wildfires in California, according to Nolan.
Litigation is a huge problem too.
“I’ve never seen anything like what is going on with litigation,” Nolan said. “Roofing companies (for example) are telling homeowners they can get them a new roof for the cost of their deductible. And if the insurance company puts up a fight, they sue. In Florida if you win that suit the insurance company also has to pay your attorney fees.”
Nolan says similar claims are coming in for Hurricane Irma damage up to two years later.
“One of the biggest insurance companies in Florida estimated its losses for Hurricane Irma 45 days after it hit. Those estimates are usually accurate within 15%,” Nolan said. “But they were still getting claims two years after the hurricane and the estimate ended up being only a third of what they paid out.”
Another issue is the idea that Citizens is looking to shed policies.
As the insurer of last resort for Florida homeowners, Citizens has grown to the point its lower rates are attracting clients that could be covered under any insurance company but choose Citizens to save money. Right now, some policy holders can save up to 30%, or more, with Citizens. But, according to state guidelines when Citizens was created, the company only insures those who cannot get insurance elsewhere — or when a homeowner’s only options are policies that are 15% or more higher than Citizens’ rates.
With rates averaging about 20% lower than private insurers, Citizens clients have passed the 500,000 mark and growing. Officers for Citizens fear the state-owned company is headed for 700,000 clients and that defeats its original purpose.
So, the answer is to raise fees. That is exactly what Citizens is considering. If that happens — an it’s probably a matter of when, not if — the last resort for homeowners is no longer attractive.
The picture is anything but rosy for homeowners looking for affordable insurance.
The state Legislature should address issue in 2021. They could begin by eliminating a 10% cap in Citizens’ annual rate increases. They could then consider legislation to make it less attractive for contractors and homeowners to sue insurance companies — although this is a slippery slope that if not done right could impact legitimate claims.
One thing is for certain. Homeowners’ insurance rates will soar in the coming months if no solution is found. And that won’t be good for builders or the continuation of Florida’s growth spurt.